A decade after L.A. County auditors delivered a harsh assessment of Teens Happy Homes, probe finds that children were repeatedly harmed in recent years and dubious financial practices grew.

A decade ago, a team of Los Angeles County auditors delivered a damning assessment of Teens Happy Homes, a private foster care agency responsible for hundreds of children.

Agency workers bought beer and cigarettes with public funds intended for mistreated children, auditors found. It billed the state and county more than $100,000 for care it never provided. Employees wrote checks to themselves worth thousands of dollars and kept no receipts.

The auditors' conclusion: The county needed to give Teens closer supervision or cancel its contract.

Not only did the county Board of Supervisors continue the Teens contract but it tripled its value, from $1 million a year to as much as $3.6 million, according to the agency's tax returns. Between 2008 and 2011, 1,154 children lived in its homes.

Interviews and an examination of public records by The Times found that questionable financial practices proliferated in recent years. At the same time, children suffered abuse and neglect repeatedly.

Robert Fellmeth, director of the Children's Advocacy Institute at the University of San Diego School of Law, said the long delay in reviewing the agency is indicative of the state and county's inattention to private foster care agencies that were created over 25 years ago.

"There are some clear failures indicating the need for financial auditing and performance oversight," Fellmeth said. "There is a need for systemic reform in this regulatory scheme."

County Supervisor Gloria Molina said Teens should finally lose its contract, and Supervisor Zev Yaroslavsky said that if the allegations against Teens prove true, they "would constitute a serious misuse of public funds and represent a grave threat to the health and safety of the foster children."

Philip Browning, director of the Department of Children and Family Services, said in an interview Thursday that he was startled to learn of the depth of problems at Teens, and that he was enlisting the help of retired homicide detectives to examine allegations of child abuse and financial malfeasance at foster care contractors.

"My marching orders are to figure out what's going on and fix it," Browning said. "I think we have a long way to go in terms of improving the monitoring of these agencies."

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Teens' chief executive, Beautina Robinson, grew up in foster care and knew the life from the inside out. She established the South Los Angeles agency's group home in 1990 and expanded with foster homes throughout Southern California.

As a private group, Teens was only loosely monitored by the state and county, which typically audits the finances at private agencies once a decade.

The routine audit of Teens in 2003 faced problems from the beginning. Shortly before auditors arrived, a sewage backup destroyed many financial records. The remaining documents painted a picture of financial chaos.

There were canceled checks showing the agency repeatedly bought cigarettes and beer with foster care money — in one instance, 30 cases' worth. There was $46,000 in unpaid federal payroll taxes. The agency's bookkeeper wrote $13,000 in checks to herself. "The agency was unable to explain the nature of these expenditures," auditors wrote.

The bookkeeper, fearing criminal prosecution, wrote to county auditors, saying Robinson had ordered two workers to "come up with receipts" to help keep staff "out of jail."

The plan fell apart when one manager refused. "He was not going to get caught up in falsifying any documents," the bookkeeper wrote in her letter, which was obtained by The Times.

An attorney for Teens declined to comment for this story.

In the end, auditors told county officials they "should consider whether to continue contracting with this agency due to the nature of these financial issues."

But the agency retained its contract, and the auditor-controller never completed another financial audit to see if problems had been fixed.

The problems at Teens Happy Homes weren't just financial.

Over a three-year period, 240 allegations of abuse or neglect were filed on behalf of youths at Teens' homes, a Times analysis of child abuse hotline data found. Teens' rate of nearly two allegations for each home was more than two times the average for the state and two-thirds higher than that of the rest of Los Angeles County.

About half of Teens' 131 facilities had no complaints during the period covered by the data, from October 2008 through September 2011. But four of them had 10 or more complaints, landing them among the top 40 in the county.

Investigators substantiated about 17% of all complaints from the Teens homes, about the same as the state average.

State investigators found one foster parent who had a child stay with a registered sex offender. In another home, they discovered a foster parent shoving a child's face into her brother's potty-training bowl. One foster mother stole the children's allowance and gift cards.